A budget of knotty contradictions

A budget of knotty contradictions

Thomas Coughlan

Wellington, May 30, 2019

Grant-Robertson-(Picture by Lynn Grieveson)

The question looming over the Wellbeing Budget, when all the hack and leak shenanigans had died down was whether the Wellbeing Budget was transformational or just presentation. 

Frankly, the confusing presentation made it very difficult to tell how transformational it really was. Helpful documents were hidden away on Treasury’s website, which didn’t seem to work for anyone but the National Party.

Impressive Numbers

Last year, press releases were organised around the main budget priorities, rebuilding critical public services, taking action on child poverty, housing and homelessness and the like. This year, the whole budget document was organised that way: the spin became the budget itself. 

But presentation aside, the numbers here are impressive. 

Credit where credit is due, $1.9 billion spent on mental health is fairly jaw-dropping. Set against the $3.2 billion in additional operational spending announced for the entire health sector in the last budget, the funding marks a coming of age in New Zealand, where the Government is finally putting serious money behind its good intentions. 

Significant spending on Health

Other significant spending in education and hospitals is well overdue, capital spending of $1.9 billion in health and $1.4 billion in education is also impressive. 

Last year’s investment statement from Treasury showed the crumbling health estate, with 19% of hospital buildings in poor or very poor condition. Treasury estimated Health alone needs $14 billion in new spending over 10 years to plug the gap.

But could they spend more? Well, if they junked the Budget Responsibility Rules, yes. Those roles commit the Government to keeping debt to 20 percent of GDP by 2021/22 — still one of the lowest rates in the OECD. Robertson is pushing the rules to the brink, bringing net debt to just a whisker under the 20% target. 

Migrant workers needed

The Government says the story isn’t just about debt, but about capacity too. Where are the workers to build new hospitals is their defence for not spending more — but is that good enough? More migration, which the Government now expects to halve over the next three years, could alleviate many of the capacity constraints by importing more labour.

This is one of the big unsung stories of both this budget and budgets past. New Zealand has chronic underinvestment in capital projects.

That is infrastructure like roads, hospitals, and schools. For nearly a decade, New Zealand wasn’t building the infrastructure it needed for its growing population. According to an ANZ report, new capital spending for each 1000 additional Kiwis fell from $142 million in fiscal year 2012 to $37 million in 2017. 

That looks set to change. While in 2014, capital spending per capita was just $200, this year it will rise to $1200 and by 2020 it will hit $1800. 

Scattered funding

As for the linked-up Wellbeing analysis, there were small but significant pieces of funding scattered throughout the budget.

It delivered $3 million of funding for surgery for transgender patients, funding the expensive surgery which will now be available to more people after the Government lifted the cap on funded surgeries last year, $140 million for expanding the refugee quota, and an impressive $80 million for Whānau Ora, suggesting New Zealand First might finally have relaxed its opposition to targeted funding for Māori. 

But within that there were some lines that seemed out of place in a Wellbeing budget. Twenty-five million dollars has been allocated to “stop the boats” fund, intended to deter refugee arrivals by boat. Immigration Minister Ian-Lees Galloway says its about safety — it’s a treacherous journey after all, which is why no one actually makes it. 

Throwing $25 million at a non-existent problem like boat people suggests this Government might be getting ready to blow the dog whistle on migration, at the same time as it boosts the refugee quota. Wellbeing? Kind of, but not really.

That number looks equally ridiculous when you set it against the $35 million pledged for new inter-island ferries — boats we actually need. 

Also in the questionable basket is the $130 million allocated to the screen production grant, a tax credit scheme to lure film production companies here. Now the Government justifies this by saying the money is only reimbursed on spending that takes place in New Zealand — so we’re net beneficiaries, but stacked up against some of the smaller spends, like $140 million for Māori development, the massive Hollywood spend-up looks odd, and certainly doesn’t square with the wellbeing focus. 

While all the analysts, bankers, economists and Treasury officials packed into the Beehive banquet hall for the budget lockup may give the occasion a feeling of dry economic sobriety, the budget is still a profoundly political document. 

The Wellbeing Budget exists somewhere in between politics and economics. The approach behind the scenes is bold, and the money is impressive, but there are still plenty of knotty contradictions introduced by the document’s many political masters.

Budget 2019: Read more

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Devil’s in the detail for big water plan

Rod Oram: Long on rhetoric, short on transformational funding

What the Wellbeing Budget should have said

Kids in schools? How the Budget will affect you

Mental health gets long-overdue cash injection

Transport spend-up, housing flat

Rail infrastructure gets a boost

Thomas Coughlan is a Newsroom Reporter based in Wellington, writing on Policy and Economics. The above story and picture, which appeared in the Newsroom website today, has been reproduced here under a Special Agreement.

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